AOL, Microsoft Windows XP talks on uncertain ground

Talks between Microsoft Corp. and AOL Time Warner Inc., concerning the inclusion of AOL’s software in the soon-to-be-released Windows XP operating system, on Monday appeared to still be alive, though just barely.

“AOL remains a very important vendor partner for Microsoft and we will work hard to assure that talks continue in the future,” a Microsoft spokeswoman in the United Kingdom said Monday. The spokeswoman, who asked not to be named, declined to confirm if discussions between the software giant and the world’s largest ISP (Internet service provider) had taken place over the weekend or what the potential sticking points have been.

AOL could not be reached for comment before press time.

The two companies are attempting to hammer out a number of licensing and legal agreements, including the contentious issue of AOL’s use of RealNetworks Inc.’s RealPlayer.

In addition to talks about including AOL’s software in Windows XP, it has been a matter of intense media speculation if AOL will agree to trade in RealPlayer for Microsoft Corp.’s competing product Windows Media Player. A media player is software that lets users play back audio and video on the Web.

Last week, rumors that negotiations between AOL and Microsoft would end with RealNetworks left out in the cold sent the RealNetworks’ stock diving nearly 20 percent. However, analysts said that while RealNetworks may lose its exclusive contract with AOL, it is unlikely that RealNetworks would be excluded given the amount of Web content formatted to RealNetworks’ media player.

Sources close to AOL had earlier confirmed to the IDG News Service that they have been in close talks with Microsoft recently, but said that no deals have been hammered out. The sources indicated that the talks centered around, but are not limited to, AOL’s continued use of Internet Explorer and Windows Media Player.

According to various media reports, including one in The New York Times newspaper, Microsoft spokesman Jim Cullinan had declared the talks “off” between the two companies on Friday evening. But by Sunday another, unnamed spokesman said discussions had restarted in Denver over the weekend, though Microsoft and AOL were still far from agreement on a number of issues.

Talks began last January when AOL’s contract to support Microsoft’s Internet Explorer browser expired.

Although AOL owns rival browser Netscape, the ISP signed a contract to exclusively support Explorer in turn for being packaged into the Windows operating systems. But with Microsoft’s Windows XP set to hit the market on Oct. 25, other issues have emerged.

On one front, the companies are trying to determine if AOL’s access software will be included in consumer version Windows XP operating system, according to the NYT report.

But on a seemingly unrelated front, the NYT quotes a person close to the talks as asserting that Microsoft has been trying to persuade AOL to agree not to lobby against Microsoft on any court battles, current or future. AOL is loath to agree to such a stipulation as it is holding on to the option of pursuing legal action based on antitrust grounds should an agreement with Microsoft fail to pan out, the report said.

Microsoft, in Redmond, Wash., can be reached at AOL Time Warner, in New York, can be contacted at